House prices are falling in Britain, with estate agents the gloomiest since 2009 and more than two-thirds of the most expensive properties selling below asking prices, according to a survey published on Thursday.
The Royal Institution of Chartered Surveyors said its house price balance, which measures the difference between the percentage of surveyors see rise and fall in house prices, fell to minus 48 in February from minus 46 in January. This is the lowest figure since April 2009.
The professional body also found that 70 per cent of properties marketed for £500,000 or more sold for less than the asking price, a figure that dropped to 60 per cent for those on the lower end.
Tarrant Parsons, RICS senior economist, said a “tighter debt climate, with mortgage affordability still too much for activity” was responsible for the drop in prices.
He added that they remain “on a downward trajectory, and are expected to further decline in the first half of the year at least”.
Data from the Bank of England this month showed that the average interest rate on new mortgages rose to 3.9 percent in January, the highest since 2010. Prospective buyers are also exposed to inflation, which has eased since last year but continues to run in double digits. .
Surveyors told the RICS survey that they expect house prices to fall in the next three months, with a net balance of minus 55, largely unchanged from the previous month. They also expected prices to contract next year, but that score rose to minus 27 from minus 40 in January.
The findings supported analysts’ expectations of more expensive mortgages, causing significant market volatility.
Gabriella Dickens, an economist at Pantheon Macroeconomics consultancy, said that house prices will fall in the coming months to about 8 percent below the August 2022 peak. Martin Beck, chief economic adviser for EY Item Club, a forecasting house, predicts a peak which is greater than 10-15 percent.
With many people unable to pay their mortgage or deposit, the letting market continued to grow in February. Tenant demand increased to a net balance of 32, while rental price expectations for the next quarter remained elevated at 45.
The survey also showed some initial signs of stabilization in the sales market, with the balance of new buyer inquiries rising from minus 45 to minus 29 month over month. This was the slowest decline since July last year, although it also represented the tenth consecutive monthly drop in demand.
The index for agreed sales is still negative at minus 26, but sales expectations for next year are generally stable, registering a net balance of minus 8 compared to minus 20 in January.
Surveyors continue to report a decline in the number of properties coming on the market, leaving inventory near its lowest level since records began in 1978.
Sam Rees, senior public affairs officer at RICS, said the housing market played a “critical” role in the UK economy and stressed the need “to boost supply through new builds and commercial property conversions”.